- The Fraud Act 2006 is generally considered a success: it captures a range of different types of fraud, and has simplified the law in this area.
- Three key issues which merit ongoing consideration are sentencing, extra-judicial reach, and the challenges posed by the rise of technology in fraud cases.
Fraud is unfortunately big business. In the UK alone, it is said to cost the economy between £137bn and £190bn each year, and is now reportedly the most common crime in England and Wales. Data suggests that during the COVID-19 pandemic from 2020-21 reports of fraud in the UK surged by 33%, and of the cases that were reported, 80% were cyber-enabled.
There is a clear trend that fraud, and in particular technology-related fraud, is on the rise. There are new cyber-related scams appearing each year, such as investment, impersonation and insurance scams, romance fraud, and crypto fraud. Fraud is clearly a global issue. But, as part of the fight on fraud, the UK legal system needs to ensure that it is robust enough to deal with the threat that emerging technology fraud poses to the global and domestic economy, and victims of fraud.
One of the legal mechanisms for tackling fraud in England and Wales is the Fraud Act 2006 (FrA 2006). FrA 2006 was brought in following a Law Commission Report in 2002 into the law on fraud. Prior to FrA 2006, there was no general offence of fraud. Instead, the law was based on a number of different offences embodied in the Theft Acts 1968-1996, and common law. This resulted in conflicting offences, statutes, and case law. The inconsistencies in the law made it difficult to apply, prosecute, and interpret the offences. For example, prosecutors had to determine which of a number of overlapping offences was the most applicable to charge a defendant with, or risk bringing several charges against a defendant which required more work for prosecutors, more court time and risked confusion for juries. Many of the old offences focused on the victim being deceived as opposed to the intention of the fraudster, which could also be difficult to prosecute. The law was generally seen as unfit to deal with all types of fraud, including emerging cyber fraud—which is why the eight deception offences under the Theft Acts 1968-1996 were repealed and replaced with FrA 2006.
The aim of FrA 2006 was to dramatically simplify the law of fraud and introduce a general statutory offence of fraud. The ambition was to improve the criminal law by making it simpler, more comprehensible to juries, more effective for prosecutions, and to have an offence that encompassed fraud in all its forms.
FrA 2006 gives a statutory definition for the criminal offence of fraud, providing one general offence which can be committed by:
i) false representation (where a person dishonestly makes a false representation);
ii) failing to disclose information (where a person dishonestly fails to disclose information which they are under a legal duty to disclose with the intention relevant to each element of fraud); and
iii) abuse of position (if a person occupies a position in which they are expected to safeguard, or not to act against, the financial interests of another person, and dishonestly abuses that position with the intention relevant to each element of fraud).
All three require a defendant to have acted dishonestly to:
i) make a gain for themselves or another; or
ii) to cause loss to another or to expose another to a risk of loss.
There are also a number of ancillary offences. The idea is that these offenses would capture all types of fraud.
When FrA 2006 was introduced, one anomaly that remained was the common law offence of conspiracy to defraud. The initial intention was to abolish this under the Criminal Law Act 1977, but this did not come about because there was a perceived risk that the most serious complex fraud involving multiple offences and defendants may not adequately be covered by FrA 2006 or other statutory offences.
Has the Fraud Act succeeded?
FrA 2006 is generally considered to be a success. There have been two post-legislative assessments of FrA 2006, in 2012 and again recently in 2022, which sought views from practitioners and prosecutors (such as the City of London Police, the Serious Fraud Office (SFO), the Attorney General’s Office and Department for Work and Pensions).
The 2012 post-legislative assessment concluded that at that time FrA 2006 was working as intended. The positives were that it had simplified the law; having a general offence of fraud allowed prosecutors to respond quickly to emerging frauds; and it covered a range of offences.
The 2022 post-legislative assessment considers whether the objectives of FrA 2006 are still being met. Overall, it concludes that FrA 2006 is generally considered to be fit for purpose, continues to meet its aims and is wide enough to capture digital fraud and adapt to developing technology, albeit this latter point is not explored at length. On the question of technology more generally, some stakeholders suggest that the technology for court processes and presentation of cases needs to be adapted, and that effective disclosure training and development in technology for sorting and reviewing material would help tackle the quantity of data that authorities deal with in fraud cases.
Outstanding issues
Despite the positive outcome of the recent assessment, there are issues which merit ongoing consideration to ensure that FrA 2006 continues to be a useful tool against fraud. Three key issues are: sentencing; extra-jurisdictional reach of FrA 2006; and the technological challenges of prosecuting fraud now and in the future.
Sentencing
Given the rise of fraud, and particularly cyber-enabled fraud, one issue to consider is whether there is appropriate sentencing under FrA 2006. The Ministry of Justice has highlighted concerns over the upper limits in sentencing which do not align with other similar offences and inconsistencies in sentences. There are concerns about whether the current sentences are sufficient deterrents to fraudsters. At present, the maximum sentence under FrA 2006 is ten years’ imprisonment. By comparison, the maximum sentence under the Proceeds of Crime Act 2002 for money laundering offences is 14 years. Aligning the sentencing would further simplify the law relating to economic crime and act as more of a deterrent.
Extra-jurisdictional reach
The next issue is the extent to which FrA 2006 applies extra-territorially. The acceleration in technology enables fraudsters to commit fraud digitally, across borders and with increasing complexity. It can be extremely difficult to identify offenders and trace misappropriated funds or property.
FrA 2006 has extra-territorial reach: the English courts have jurisdiction even where only one element of the offence has taken place in the UK. However, stakeholders have asked for clarity about its extra-territorial application, and there have been calls to include express provisions that would encourage its extra-territorial use and tackle fraud by corporations which can span multiple jurisdictions. There are other statutory regimes where prosecutors can bring charges even where criminal conduct occurred overseas and involves non-UK persons. For example, under the Bribery Act 2010, a foreign company which carries out any part of its business in the UK could be prosecuted for failing to prevent bribery by an agent, employee or other representative, even if the bribery happens overseas and involves non-UK persons.
FrA 2006 could go further here. Express provisions would assist the UK in tackling digital fraud committed across borders and assist in the global fight against fraud.
Technological challenges
The role and rise of technology in fraud cases is one of the biggest considerations for legal stakeholders—from how to tackle emerging cyber frauds to how to manage mass digital data in fraud investigations.
One of the major challenges of advancing technology in fraud cases is how to deal with mass digital data. Investigators and prosecutors have had to find ways to try to deal with this alongside their disclosure obligations. There can be vast amounts of data, across multiple devices, custodians and locations. This brings with it pressures of storage, review (who is best placed), resource and costing challenges, pressures on juries to assimilate and understand this information, and judges to manage cases with vast amounts of data.
There are examples where the system has struggled with these challenges. For example, the SFO has recently had two reviews into disclosure failings. The SFO has since encouraged reform of disclosure rules to rebalance the system. However, in the latest post-legislative assessment, the considerations about the challenges of advancing technology and mass digital data are given a fairly light touch—even though this is an area that is likely to become increasingly challenging for investigators, prosecutors and the courts. This is a subject that will likely need to be reviewed again.
Challenges ahead?
Fifteen years on, FrA 2006 is currently fit for purpose and captures a range of different types of fraud. It has simplified the law, even though the common law offence of conspiracy to defraud remained in force. Although this is an anomaly, given the current climate, it is important that the UK has the legal framework to deal with the most complex cases of fraud and economic crime. FrA 2006 and the retained conspiracy to defraud offence sit alongside offences such as money laundering and false accounting, which are all important in ensuring that the law covers all types of fraud. There is likely to continue to be a proliferation of fraud in emerging technologies. That will present new and ever-changing challenges for investigators, prosecutors and the court system in dealing with advancing technology. In tackling that, authorities should look to harness technology to assist with the presentation of cases for juries, court processes, and the storing and reviewing of mass digital data.
Stewart Hey, partner & Abigail Rushton, senior associate, Charles Russell Speechlys (www.charlesrussellspeechlys.com).
